Assessment Orders Quashed: Lack of Jurisdiction under Income Tax Act

The Tribunal quashed the assessment orders passed under section 153A r.w.s. 143(3) of the Income Tax Act, 1961, declaring them invalid and void ab initio. It held that the assessing officer lacked jurisdiction to issue notices under section 153A as the search was conducted at the residential premises of the partners, not the business premises of the firm. The Tribunal emphasized that incriminating material found at the partners' residential premises should trigger proceedings under section 153C, not section 153A. The appeals filed by the assessee for all three years were allowed.

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Issues Involved:
1. Validity of the order passed by the assessing officer under section 153A read with section 143(3) of the Income Tax Act, 1961.
2. Jurisdiction of the assessing officer to initiate proceedings under section 153A based on a survey under section 133A.
3. Applicability of section 153C instead of section 153A when incriminating documents are found at the residential premises of the partners.

Detailed Analysis:

Issue 1: Validity of the Order Under Section 153A r.w.s. 143(3)
The assessee contended that the order passed by the assessing officer under section 153A read with section 143(3) is "bad in law, without jurisdiction and void ab initio." The primary argument was that the notice under section 153A was issued under the erroneous assumption that the appellant firm was subject to search under section 132. The search was conducted at the residential premises of the partners, not at the business premises of the firm. The business premises were only subject to a survey under section 133A, which does not authorize the initiation of proceedings under section 153A.

Issue 2: Jurisdiction to Initiate Proceedings Under Section 153A
The appellant argued that the survey action under section 133A does not entitle the assessing officer to initiate proceedings under section 153A. The search warrant mentioned the name of the assessee firm but specified the residential premises of the partners as the place of search. No search was conducted at the business premises of the firm, and no incriminating material was found there. The authorized officers prepared an inventory during the survey, and the word "search" was canceled on all pages, indicating that only a survey was conducted.

Issue 3: Applicability of Section 153C
The appellant contended that even if incriminating documents related to the partnership firm were found during the search at the residential premises of the partners, action against the firm should be initiated under section 153C, not section 153A. The firm is a separate legal entity, and a search at the residential premises of the partners does not constitute a search of the firm.

Tribunal's Findings:

On Validity of the Order Under Section 153A r.w.s. 143(3)
The Tribunal found that the search warrant authorized the search of the residential premises of the partners, not the business premises of the assessee firm. The business premises were only subject to a survey under section 133A. Therefore, the assessing officer did not have the jurisdiction to issue a notice under section 153A. The Tribunal quashed the assessment order passed under section 153A r.w.s. 143(3), declaring it invalid and void ab initio.

On Jurisdiction to Initiate Proceedings Under Section 153A
The Tribunal analyzed the provisions of sections 132(1) and 153A and concluded that the conditions for assuming jurisdiction under section 153A were not satisfied. The search was conducted at the residential premises of the partners, not at the business premises of the firm. The Tribunal held that the assessing officer could not initiate proceedings under section 153A based on a survey under section 133A.

On Applicability of Section 153C
The Tribunal agreed with the appellant's contention that any incriminating material found at the residential premises of the partners should lead to proceedings under section 153C, not section 153A. The Tribunal cited various judicial precedents supporting this view, including decisions from the ITAT Raipur bench, ITAT Mumbai bench, and the jurisdictional Bombay High Court.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for all three years, quashing the assessment orders passed under section 153A r.w.s. 143(3) of the Income Tax Act, 1961. The Tribunal held that the assessing officer did not have the jurisdiction to issue notices under section 153A based on a survey under section 133A and that any action should have been initiated under section 153C if incriminating material was found at the residential premises of the partners.

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